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What stage are you at?

I believe that we have several stages of life when estate planning to consider.

The first is the wonder stage. This is when you are just starting out and wondering about where life will take you and what will happen. You still need a will and powers of attorney.

The next is blunder. This stage is when you start pushing into your interests and figuring out what works and what doesn’t. You may have failed business, wild success, and unforeseen events in the blunder stage. You need everything from the wonder stage plus some sort of wealth replacement or contingency plan documents like life insurance or a line of credit.

The next is the thunder stage. This is when you are accumulating wealth and executing on your vision that you refined while blundering. Now options to grow and preferential deals with other resource holders become important. Formal relationships and business entities play a role.

Following thunder is the sunder stage. This stage of your life is when you should consider separating assets into various groupings, selling assets, or pushing them down to the next generation. Now you are considering rights of first refusal to the next generation, plan sales, reduction in work, and gifting.

The final stage is the down under. This stage is, depending on your personal ethos, preparing for the next great chapter of your story, preparing to haunt your friends and relatives or simply transitioning to an official daisy pusher. All the prior stages have a role to play as do an honest assessment of what you can do and script for in advance and what you have no control over.

Each one of these stages calls for different considerations and different planning documents to address your departure during that stage of your life.

A friend of mine was recently asked to define what is a good estate plan. One of the responses was:

“A system of production asset and real property management and disposition that secures control to the producer(s) bearing the greatest financial risk, flexible enough to absorb the shocks and family member relationships" or Land wealth retention plan. (Citation available on request).

My response to the question was laid out below with Apologies to CLAUSEWITZ, On War and Sun Tzu, The Art of War

It is a very difficult task to construct a theory for the art of a good estate plan and so many attempts have failed that most people say that it is impossible.

We would give up on estate planning but we can all agree to certain maxims that exist:

That on farm heirs will be disadvantaged in the absence of a well thought out and executed plan;

That each benefited party to an estate plan has potential reactions and participations should be evaluated from the angle for their own pecuniary gain first and that of their off spring second;

That clearly defined objective and distributions of assets and power are essential and that all thoughts of parties getting along or making decisions for the benefit of a collective over their own best interests because they always have to date or have shared genetic material is a sure fire way to destroy a plan;

That money and assets provided to off farm children can and will serve as a resource pool to litigate grievances, real and perceived, against the on farm heir while the on farm heir will be provided assets that they seek to shepherd for the business continuity and place them at a disadvantage in litigation;

That success must be defined not the plan maker and nobody else;

That every year that wealth is transferred to the on-farm heir during the elder generations life time erodes the position of the off farm heir to claim inequitable treatment or surprise;

That winners plan ahead, and planning is identifying who is responsible for strength and weakness, what are those strengths and weaknesses, where are those strengths and weaknesses, when are those strengths and weaknesses exposed, and as a result what advantages are available and how they should they be leveraged.

It might be a bit jaded but, based on just this last week’s conversations about conflict between off farm heirs and on farm heirs and the number of court actions I have seen recently where otherwise rational adult children of a farm operation turn to the court to divide and parse out the family land wealth, it is accurate.

The old country song about “that ain’t Country” coupled with a Supreme Court ruling about when something qualifies as hardcore porn that essentially says “I know it when I see it,” doesn’t quite get a handle on what portions of the law of the land impact farm operators. Food and fiber production impacts us all and many layers of the law impact that production.

The American Ag Law Association annual meeting was held 10-11 NOV. Here is sampler of that topics the nation’s premier ag lawyers are currently wrestling with.

Urban Ag and Food Issues, Pipeline Projects, Federal Ag Policy (Farm Bill), Wetlands regulation, Ag Finance, Gene Editing, Ag producer contract agreements, Food traceability and its impact on food production, Anti-trust and Cooperative Law issues, Confined Animal Feeding regulations, Long term care cost impacts on farm operations, Agri Tourism, Farm Bankruptcy, Carbon Capture, Solar Leases, Immigration law impact on Ag operations, Land Use law updates, tax law updates, civil rights cases against the USDA, Artificial Intelligence and autonomous ag equipment, copyright and trademark law in the ag space, and internet sales direct from the farm. That is a wide swath of coverage.

We like to think as farm operators in the remote portion of the country we are exempt from a number of things and issues. Sure, we are outside of the Border Patrol’s 100 mile buffer zone (and the international airport radius for many of us), we are predicted to not be in a direct nuclear fall out zone and our population is low. The laundry list above does impact northeast Iowa and being aware of what laws are being implemented is important.

Here is an example

The latest requirement from the federal government will require all corporations, LLCS, and partnerships (really any business entity filed with the secretary of state) to report all owners who have over 25% or have substantial control of the organization.

The idea is to stop money laundering. Instead of having shown probable cause and get a warrant to dig into a private company’s books, the feds will just be able access the self-populated data base of ownership interest and take a look.

Not overly impressed with skipping the constitutional privacy and probable cause barriers that were removed by requiring the reporting at all. Also, we have seen that no government actors have ever misused or abused access to information for private gain. Oh wait, police officers using criminal background checks for potential tinder hookups was just in the news.

It will cost your organization some money as either a lawyer or tax preparer is likely going to have to file the information for your organization. The law passed in 2021 but true to form the regulations and details are now just starting to jell up. The overlords may give an extra year before implementation but then again, they don’t seem to be getting much done in the Potomac these days.

What’s is the ag law connection? Not only do farm operations use these entities for their own liability and business succession planning, but also they interact with those companies all the time. Those companies are going to pass the cost of this compliance on to the consumer (farm operator) who will not be able to pass that cost in most cases when they sell bulk commodities.

Taste the rainbow… California is in charge …. Again

Fresh off its dictation to the pork industry on production methods, the California EPA has banned red dye no 3. This is based on peer reviewed articles where some of the information says the dye causes behavioral and cognitive issues in kids. Of note, the federal EPA hasn’t made the same stance. The dye is in a large amount of products and as California is one of the largest markets for consumption, food industry members will likely fall in line like the pork industry appears to be doing. They have until 2027 to come to heel.

Of note, this ban was labeled the “Skittles ban” as at one time, the ban included Titanium dioxide, which is part of the north American formulary for Skittles. That substance is still authorized, and Skittles doesn’t use Red 3 (nor does M&Ms btw). So, you are free continue to debate with your friends if the original Skittles have a different taste by color (the company position) or if they just smell different and that is what causes the taste difference (Neuroscientist Don Katz at Brandies University’s position)

Big Meat, Big Data, little paycheck for producers.

The USDOJ has taken aim at Agri Stats, Inc for its aggregating and sharing data with meat industry producers as an anti-trust action under the Sherman Act. The government is concerned the meat industry harmed farmers by having access to this information and flattened prices and output. The Company claims no harm no foul.

Big meat doing big meat things to farm producers is nothing new. Data drives decisions and if all the buyers of your product have all of the data and you have none, its easier to walk up the Bear Sand Dunes along Lake Michigan. If the DOJ actually gets somewhere that will be new. Upton Sinclair was the last effective anti-Trust regulator in the meat industry as far as I am concerned.

Treatment rules expanding.

The EPA has let the world know that it is considering adding pesticide coating treatments to the list of things that have to be inspected by FIFRA (Federal Insecticide, Fungicide and Rodenticide Act. Currently treated seed is exempted by a specific EPA determination. This change in position comes after environmental groups filed suit after first asserting their request in 2017. New York is already wading in on the side of regulation at the state level as they are considering a ban of treated seeds. I do think in this instance if the feds don’t expand the coverage, the I states (Iowa, Indiana, Illinois) have enough seed purchasing power that even California joining the ban at the state level won’t make treated seeds go away anytime soon.

Avast, Seed Pirates!

Corteva sued Inari Ag alleging they used another party to obtain genetic material and plant protected seed. This would be prevented under the PVP (Plant Variety Protection) certificates that Corteva has. Cortevea has indicates that Inari further modified the seed and tried to obtain its own patent.

This action is part of a larger effort by those who invest in seed technology to prevent those who didn’t’ from benefiting from their research and development of the product. It is sometimes referred to as seed piracy as it is a theft of intellectual property, and the image of a pirate immediately shapes the minds eye on who is the bad operator.

Bottom line up front. You have a 100 percent chance of dying. It is the third leg of the only constants in life, which is death, taxes, and change.

The baby boom generation is dying off. One report says 20 million baby boomers are already pushing up daisies. Based on a life expectancy of mid 70s, a large number of deaths are happening 2034-2044

Do you need a will and estate plan? Yes. No matter how old you are.

Will your will be needed at your death? Maybe, maybe not. It depends on when and how you die and how much stuff you have when you die.

Do you need powers of attorney for health care decisions and general powers of attorney for when you are disabled or not able to make decision but are not dead? Yes. No matter how old you are.

Will your power of attorney holders ever act on your behalf? Maybe but it is more likely than not.

Can a power of attorney act after your death. No.

Can I just give it all away now without consequences. Maybe, maybe not. You need to consider gift tax and eligibility for state aid for nursing home care assistance before you do a large gift.

Can’t I just put my kids on my deed with me? Sure, see above and all to consider the kids now own part of the property and the people they owe money to will be glad to see the asset in the kids name.

If both spouses are listed on the deed, I don’t have to do anything when the firsts one dies. Wrong. You may have to open an estate; you may have to file an affidavit. Generally, the longer you have had the property and not reviewed title, the higher the chance that you may be holding the property in a manner that requires a probate estate when either spouse dies.

Nursing home care in Iowa is reported to average $89,000 a year. Average stay for a female is 3 years and males is 18 months. 20% of the population will need I think in actual costs, $100,000 per year is a better planning number. That is $1,000,000 for five years of care for a married couple. If you have that much saved or have that much equity, you can make some smart plans now to preserve assets for the next generation. Likewise, if you have cashflow that allows you to pay as you go. That cash flow cold be nursing home insurance, social security, and retirement payments. It could be cash rent from real estate.

If you don’t have that much in asset or cash flow but have some assets that you want to see, get to the next generation, some more intensive planning is required.

If you find yourself with not much in cash reserves, equity or cash flow, it may be a good course of action to enjoy your accumulated wealth while you can and not spend a lot of effort on trying to create a pile of cash to pay for care that is vital but not probably how most folks want to spend their earnings in their last years.

What’s right for you is not right for your bridge partner, your sister in-law, or the neighbor. What is a good call is to review your plan and consult the professionals you trust.

If you have an ag operation and you want to see it from the pearly gates as more than a name on a yield monitor, you would do well to establish a business succession plan as part of your larger estate plan. That will require hard decisions and it may not result in a perfectly divided wealth transfer the next generation. Setting aside a desire to demonstrate love and affection equally from the desire to transfer a business asset to the next generation who has likely helped you maintain or grow that asset is crucial to making any meaningful plan.

Monday, May 27, 2024
  • Patrick B. Dillon
  • Jill Dillon
  • Tori Beyer
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill is a firm owner but not currently accepting private pay clients. Jill still has ties to her family farm operation which includes a dairy herd.
Dillon Law PC
Tori is a University of Iowa undergraduate where she double majored in Criminology, Justice, and Law and Ethics and Public Policy and a North Dakota Law School graduate. Tori practices in the Sumner office. Tori's areas of practice include but are not limited to estate planning, wills/probate, criminal defense, and civil litigation.

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